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0% found this document useful (0 votes)
216 views256 pagesCommercial Law
dxfhdzfhdfhdsfhfsdh
Uploaded by
AngelCopyright
© © All Rights Reserved
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Available Formats
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/ 256
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ATENEO
CENTRAL
BAR OPERATIONS 2019
JORGE ALFONSO C. MELO
LEA sum
‘ATENEO CENTRAL BAR OPERATIONS
PATRICK EDWARD BALISONG
KATRINA Y. COSCOLLUELA JONATHAN VicTOR NOEL CCZARINA CHER CUERPO
GENICA THERESE ENDALUZ JOHN STEPHEN PANGILINAN BENIGNO ENCISO
DEAN JOSE MARIA HOFILERA
"ATTY. ROEL REFRAN
ISABELLA NAGUIAT
CLAUDINE BERNAS
EUNICE A. MALAYO
cone Opens ATENEO CENTRAL
BAR OPERATIONS 2019 MERCANTILE LAW.
—TLETTERS OF GREDIT AND TRUST RECEIPTS
A. Basic Concepts,
4. Doctrine of Independence,
2. Fraud Exception Principle.
3. Doctrine of Strict Compliance.
4. Warehouseman's lien,
18, Rights and Obligations of Petes.
1. Entrusterientruste. :
2. Applicantbanksfbeneficiarles.
. Remedies Available.
NEGOTIAGLE INSTRUMENTS LAW,
Roquisites of Negotiablty.
Forgery and Material Alteration,
Negotiation...
Rights of the Holder
4. Holder in Due Course
2. Defense Against the Holder
&. Checks
TCINSURANGE CODE
eomp
A, Basie Concepts, 39
4. What may be insure’ 38
21 insurable interest. . CIE ‘at
3. Double insurance and Over insurance. wad
4 Reinsurance. nnmnssnnnnnnnvnn a
5. No fault, suicide, and incontest SEER 45
B, Perfection ofthe Insurance Contract nnn 48
C. Rights and Obligation ofthe Parties. net)
1. Insurer : 53
2. Insured I 54
3. Beneficiary son cnn
D. Rescission of Insurance Contracts ——— 54
4. Coneealmentrer nn ea
21 Misrepresentation or omissionsa.nsnuncsnnnennn 56
3. Breach of warranties. Isr
E, Loss. nn 39
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‘A. Common Carers
1. Concept... .
2. Common Carrer v, Private Carr
3. Diligence Required.
B, Obligations and Liablities.cunenene
4. Vigilance over goods.
2. Safety of passengers.
. Detenses available to a common cartier.
1. Proof of negligence.
2, Due alligence In the selection and supervision of employees.
3. Fortuitous event,
4. Contributory negligence.
5. Doctrine of last elear chance.
D. Extent of ability.
1. Recovorable damages.
2. Stipulations limiting lability.
5: Limitations under the Warsaw Convention ncn.
‘Vi CORPORATION LAW (Provisions of BP 6B, not affecied by RA T1235)
A. General Prnciples...nnnnmnnnennnnse 9@
4. Nationality of corporations... cn 02
a. Place of incorporation test... ——— Coane
Bb. Control test 402
fe. Grandfather rule.ssoeson oo 03
2, Doctrine of separate juridical personality. 408
3. Doctrine of piercing the corporate veil (cine $08
8, De facto corporations and corporations by estoppel
©. Powers of corporations. aa
4. How powers are exercised a7
2. Ultra vires oct cnn?
3. Trust fund doctrine... nnn 120
D. Board of Directors and Trustees. snnnecnneonn SLIIaat
4 Basie principles. 424
‘2. Doctrine of centralized management. at
b. Business judgment rue. 424
2. Duties, liabilities, and responsibility for unlawful acts 126
E, Stockholders and Members. ard
4. Doctrine of equality of shares. 127
2. Property rights. 129
2, Right to dividends, . . 129
». Right to inspect... nnannnnnnn 49
. tt
«. Pre-emptive right. 101
4, Right of first rotus
5. Intra-corporate disputes
a, Coneapt
». Individual vs. representative vs. derivative suit.
F. Stock vs. non-stock corporations
G. Foreign Corporations.
4. What constitutes “doing business”
2, Personally to sue and suabilly..
H. Bergers and Consolidation...
1. Concept.
2: Effects and limitations.
‘Vi SECURITIES REGULATION CODE (RA. No. 6758)
AA. Registration requirement; exemptions... ast
B. Prohibition on fraud, manipulation, and insider trading. “61
C. Protection of investors. fomnnnonnnnn 163
4, Tender offer rule. eee fe3)
2. Rules on proxy solicitation 163
53. Disclosure rule. 464
Cr saves rans
[A. The Now Central Bank Act (RA 7683, as amended by RA 11241) onnunue 166
4. Handling of banks in stress... nw : 66
2. Conservatorship sn. = 166
b. Closure: II 167
© Receivership.. 469
4. Liguldation. : 169
1B. Secrecy of bank deposit (RA 1405, as amended, and RA 6426, as amended) ..173
4. Prohibited acts... et a73
2, Exceptions from coverage. 74
3. Gamishmont of deposits, including foreign deposits, CLs
. General Banking Law of 2000 (RA 8791). a76
1. Nature of bank funds and bank deposits. 478
2, Diligence required of banks. ae 179
3. Prohibited transactions by bank directors and officers. 179
D. Philippine Depositinsurance Corporation Act (RA 3691, as amended) worn nrnc180
4. Maximum deposit insurance coverage. 180
2, Meaning of insured deposit. 180
3. Spliting of deposit. “180
Vir INTELLECTUAL PROPERTY LAW
A. Patents oe 182 3
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41. Patentable vs. non-patentable. nese
2. Ownership of» patent :
3, Grounds for cancellation of a patent.
4. Remedy of the true and actual Inventor. nonrnnn
‘5, Rights conferred by a patent a oo
= 6. Limitations on patent rights.
7. Patent infringement.
8. Trademarks, 7 nen
4, Marks vs collective marks vs. trade names.
2. Requisition of ownership.
‘a. Concept of actual use...
b._ Effect of registration
3, Non-registerable marks.
4. Walt-krown marks. un .
5. Priority right. oe
&._ Rights conferred by registration
7. Trademark infingement.
8. Cancellation of registration srursnennneviennnevnirinnnenrn 208
9. Unfair competition. ‘203
C. Copyrights... 205
1. Copyrightable works..nnsssennsnnnnn Caos
2. Non-copyrightable works : 206
3. Rights conferred by copyright
4. Ownership of a copyright nnsnsssn SIE
5. Limitations on copyright :
8. Doctrine of fai use
7. Copyright infringement. SE
TK ANTEMONEY LAUNDERING ACT [RA S160, as amended by RA. O10
‘A. Covered institutions and thelr obligations nm 22
B. Covered and suspicious transactions. na
C. When is money laundering commited (including prodicate crimes) 214
._ Safe harbor provision, sinnerman AS
E, Authority to inquire Into bank deposits, : ai
F._ Freezing and orftture nnn a aw
TX ELECTRONIC COMMERCE ACT OF 2000 (RA. 782) and AM. No. O7-O1-SC or the
Rules on Electronic Evidence
‘A. Legal recognition of electronic data messages, documents, and signature.....219
B, _Prosumption relating to electronic signatures. a 220
€. Admissibility and evidential woight of electronic data message or electronic
focument, 200
D. Obligation of confidentiality. a zat BL DATA PRIVACY ACT (RA No. 10173
A. Personal vs. Sensitive personal information. seinen 228
8 ar
c — ‘28
D. Rights of Data Subject. Sas
Ti FINANCIAL REHABILITATION AND INSOLVENCY ACT OF 2010 (RA, No. 10743)
AL Basle Concepts.. a 231
A. Rehabilittion. secs east
2. Insolvency. me 2st
3. Liquidation, Oa
4 Suspension of Payment
odes of rehabilitation a 232
4. Court supervised rehabilitation sn... 232
a. Voluntary vs. involuntary. LLIN asa
b. Commencement order (including siay order) CONE
© Rehabilitation receiver and management committe 236
3. Determination of elaims
fe. Rehabilitation plan. sonnel 238
i. i. Concept of feasibility
ii. i, Material financial commitments
Iii Liquidation analysis
1. Creditor approval and contirmation. sont 8
GQ. Failure of rehabilitation .neunrone 230
2. Prosnegotised rehabilitation. IIINENIaao
a. How initiated ae
Bb. Perlod and effect of approval van 2a
3. Gutof.court or Informal Restructuring Agreement of Rehabilitation Plan. 241
2. Minimum raquiramants..nrscesnennssinn et
bStandstil period LEER aa
©. Gram down effect.
©. Liquidation... —
4." Voluntary liquidation vs. involuntary liquidation vs. conversion,
2. Procedure, nen
a. Liquidation order, effects, :
2. _ Determination of claims:
D. Suspension of Payments; Suspension of Payment Order.
E. Remedies:
4. Motion for reconsideration
2. Petition for certiorari
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[ATENEO CENTRAL,
BAR OPERATIONS 2019,
LETTERS OF CREDIT AND TRUST
RECEIPTS,
LLLETTERS OF CREDIT AND TRUST RECEIPTS
‘A. Basie Concepts
4. Doctrine of independence
2 Fraud exception Princlple
E. Boctrine of Sit Compliance
44. Worshooseman' en
Right and Obligations of Parties
4. Entusteentustee
2. Applicantbonkatbeneicary
©. Remedies avaible
Letter of creat
‘Aletr rom 3 merchont or 9 bank or banker inane pce,
‘addresses to aroer, in anolher ace or cour,
‘Tequesting he other bank io pay money or deliver goods
to a tid party named there, the opering bank Under
taking to pref te money for ho goods oro repay
im
ister requesting one person to make advances tos
tre person on the credit of the wher who assumos
responsilly for payment Of tie dott Varela Io the
‘adcresene
Nature of Letter of Creat
‘2. A financial device developed by morchants 23
‘convenient and relatively safe mode of paymert to
Satay the soomingy Freconclatle eres of he
‘Sele, wo relues to pa wth Nis goods bear hes
al, nd a Buyer, who wants to have contol of he
‘00d before paying (Transfeld Philipines v. Luzon
pare Corp, Gi No. 145747, 2008).
1b. lg commitment by the ba tat
aie
le i be
‘Purpoce of Ltters of Credit
1. Astothe SELLER
‘+ nsura tos sete payment of @detnte amount
upon presentation of documents
[Enablas tha ella to release his ivenory or stack n
trade witout eeeking eed aces amis own bak
forthabuye
bas tothe BUYER
‘+ Ges the buyer the oppotunty tole goods even
witout meray ut en his ea starng wih the
pening bari
COMMERCIAL LAW
oT Latars of Crea
Commerce Latter of Credit
Aan insramenk by whieh 3 bank, fr ie aceount of the
‘yar dives formal evdanoe toa eller, of ie wibngnese
to pert him, the sles, to daw bie against ton ces
ters, ad Spulatos in iogat orm Data such is wi be
honored
4. According to Methods of Transmission
8) Circular Later of Great
1s aderessed to parsons in general in which the
opening bank undetakes to honor the
Denaflay’s dats under cortainsipulatos
condiions, Tis may eiber be mailed er by the
"sung bank oth Beneficiyorcolvered bythe
Issuing ban othe accresiod euyer, 0 be males
byhimte the beneisay.
1») Specially Advised Leter of Greet
Wis tener tothe benecary by the opening
‘bank trough the mecium of ts correspondent in *
the viinty of he bene.
2. According te Duration
8) Revocable Letter of Credit
“The opening bankleaves the duration ofthe credit
fepen for subsaquent consideration and. thus
‘eserves the right to wha om the Warsacton
by stating tat ks "good 86 cance” or good =
Unt spies date "unless sooner revoke
) revocable Letter of Crit
The ising bank Joes not reserves right to
revoke the cred. The consent ofthe pay who
Sought th opering of helt of credt and the
benetoiay must be obtained fafore It may be
revoked, Thieves he sallor eatin ol payment.
Issuing bark may nol, witout he consent of te
beneteiay (cllr) ard the applicant (buyer),
revoke bis undertaking under the ltor
3. According to Obigation
42), Uncontmed Letter of Credit
“The noviyng anki requested merely to act 25
‘te medium thvough which the opening bank's
‘obligations wansmitestothe Beneilay Isler
of advice shal guaraice the authenty ofthe
‘message ts vansmting on behalf fhe opening
bank
get of 250 [ATENEO CENTRAL
[9AR OPERATIONS 2019,
‘BY Sontmed Later of Great
“The etiyng bank gves an absolule assurance
that "the opening ‘Bark’. cbigation wil be
pores
Iravocable v. Confirmed Letters of Credit
TRREVOCABLE — | CONFIRMED LETTERS
LETTERS OF CREDIT ‘OF CREDIT
fers toe curaion of [Raters to he. tnd oT
the te of ea ‘oligaton assumed bye
‘oreapondent bank
‘Tha sang bank made |The caresponden bank
roveseraton cfhis ight | ves an absolute
to “revoke. once, it assurance that wil
cannot 6030 wibou! the | undertakes he fsung
Gongent of the | bank's aiigation a ts om
benef. ‘ezorng Lo the toms ond
sonailone othe ea
4. According to Mathed of Payment
8) Negation.
‘Tho beneflary i 0 draw his eras in a foreign
cuency ether in th opening foreign Bank on
lao opening feign bank, which eras <0
‘un the benefiary may sel to the novtying
Dane or any ctor bane in hi locaty. The
Denotcary negates hi frlgn curency dats
{oun under the crt to the bank inns loally
feng him the best te
) Straight
‘The benetoay is pald by a becca to him and
esigated by he opening tank. The drafts are
‘sal erawn inthe eurency ofthe baneficiry.
Sight and Acceptance Latter of Credit
Under @slaht ered the beneficiary dats ae drawn
payable at sight. Once pei, tho tats serve simply 2
receipts for payment snd are wihout value for any ther
purpose.
In bn accantance cri, tis sulted thatthe dats be
drawn at lie, for secsptanco, upen somo walhrputed
Donk ina canter fitemational nance. This suse the
sceredted buyer andthe opening bank want to use te
‘ras 3s a means by which to aban funds for nancng
the eneadion ins decaunt-madot. The an i
Gscounted aft accoptanc andthe beneficiary is placed
In fonds, The scredkod buyer ned not fursh funds to
8) the daft ul ts atu.
5. According to Method of Reimbursement
COMMERCIAL LAW
a simple
A ater of ert where an opening bankinsructing
'correspanant fo ata tha paying bank caine
fan account in the eateney to be paid wih he
paying tank. The amount of payment made tothe
benefcary and the paying bank's commission for
the sence periormod is debited to hs account
>) Reimbursement
(Ozzasionay he opaning bank doesn't have an
aceount wih the coespondent i chooses 2s &
paving bank ar, having an account may prefer not
to have lt debied. In the lair case, the paying
ban wil draw a draft fr the amount of ls
payers, with commision and Inerest forthe
patos eapsing unt rémbursement, cher ane
pening bark or the corespondent wih which the
‘pening bark eres an account,
6. According to Provision for Renewal
'2) Revolving Credits
‘The opening bank who may be witing to Finance
aggegste shipments which wil exceed the
[mount of crt s wang to have osistanding at
‘ne ime forthe sarees buyer.
single conmari later of rat maybe given 2
‘fo cuffan to cover the prod of lire necessary
te complete the vensacton, with the resticion
‘hal te amour shal ol exceed the nt set
‘There should be a provizo that, upon note from
the opening bark that any drat wich the
bonetelay has awn win that limit as been
aid and ered by he sored buyer, the he
Sur becomes ave othe benefiay
») cumulative
‘Amounis not used In one month ar avaabe in
‘sueceeding months.
©) Non Cumulative
“Amounts unused rng the mont apse,
7. According to Source of Payment
2) Loeal Cureney
‘credit that stipulates tha alts ae to be awn
Inthe cutency ofthe domi othe beneficiay
Page 201250,
ecocooooo0o0c00o0o000000090009090
oc o
ATENEO CENTRAL
[BAR OPERATIONS 2019,
BY Foreign Corency,
Avcredi which stpusts that rats are to bo
raw in a foreign euroncy, wheter tat ofthe
accredited buyer ono.
Commercial. standby Letters of Greet
‘COMMERCIAL LETTERS | STANDBY LETTERS OF
(OF CREDIT ‘CREDIT
ATURE
ReameLmachanim | A mi
'Pajabo pan Ths payable osaller
resentation by seer | upon enifeation of
boneteiay of documents | pary'snomperommance
“owing hathenes | "ofan apreemer
‘complied with sates
"ageoment,
‘DOCUMENTATION
‘Salon banator must Seller benencary must
show documents that he | show that apotcart hae
has perormedns |” NOT perormed his
conraet ontrack
‘CERTIFICATION,
Sélorbenetiry need | Selle benatisary must
‘otal any certeation. | cory abigor nas not
performed ns const
‘ition tom a bark addressed to ane or mare of it
conerpondens sang that sale up lo ® cera sum
‘aun by the benicar willbe Honore bythe bank
ote
‘+The purpose of taveler's etre cred is to provide
1 ole wis finds en rote
+ OR bring sexes card,
‘Specially Advised Letter of rect
is adrossod to erly ore bank.
Circutar Later of Crit
Iti edeseed to 2 numberof cerespondants.
Essential Conditions (Art. 8)
2. Tobe issuedin favor of dette person
1. Tote mito a txed and speifed aroun. or ©
fone of more undetermined amounts, ul within 3
‘maximum elite afuhicn hae tobe stated exact
‘Contents of Letters of Creit(SAINTS-SCOE})
5, Signeture ofthe witer
Nome of teinshidual er cance forwhose acount
Wietesued
‘COMMERCIAL LAW
The approninate vas he goods to be Spa
‘and tho genera nature ofthe goede
4. The fuance of the aafs whiod the ele oust
‘row andthe name of te bank on whieh he rats
rerote drawn
1. The ems of sale
1 Aialamont esto whether the drat ae tobe drm
or 100% of te cost ofthe merchanie o far 8
lesser percentage
9. The shipping route
Fh The gract shiping and oer gocuments which
‘ust be stached tthe date of he slr
|. The aulside date oF the shipment and the outside
‘ate by which te slr o negate his orate to
hich the specied documents are attached
|. lear nication upon the par ofthe issuing bank
‘hat the sll’ tats wl be duly honored
‘Buyer (Applicant
Procures the Teter of credit and obliges himselt to
emburse he issuing bark upon recep oF tne decurent
oti,
Issuing Bank
Unertakest pay the seer upon receipt ofthe cat and
rope cecum tes ano surender ne documents
{o "the buyer upon reimbursemont, lung bank's
tigations saldary wih that ofthe buyer fist Bank.
AC, GF. No, 74854, 1988)
‘Note Usually the esing bank meray substulas Hs oun
promise to pay for that of ts customer, who in tum
promises o ay he bank the amount the creat and he
feos mutaly agreed upon. “Once te issuing bark shall
have paid he Deneflayaierhe laters complance wah
the temo leas of cre, the eaing bankis ened
‘orelmbursament or eve amaurt pid under te ter
‘rest (Gaior and Guy CA and Asia Une Bank GR.
no. 187818, 2012,
Seller (Seneiclary)
iro in comple wil the contract of sale sipe the
goods tothe buyer and dalvars the documonts ofS sré
{ratio te issuing Banko recover payment
The Number of Parties May Include:
1 Advising (Notifying) Bank
May be uzed to canvey othe solr the aulsonce of
the crt, but does net assure hat he issuing bank
wil pay and may fase to acoapt the cats wahout
boing able ark of America v. CA, GR No, 105395,
1993)
Page 8 of 250 ATENEO CENTRAL
[BAR OPERATIONS 2019,
7 Contig Bank
\irvch wl land erence to he lor of ered esues
by ateaseckoown suing bank be config barks
recy Tabet pay te seller beneticry
8. Paying Bank
‘Which undertakes lo eneash the dats ckawn by the
exporter
- Negotiating Bank
Instead of ging tothe place ofthe isuing bank to
‘Ssim_ payment tha buyer may approach the
rogatstng bank 19 have the drat dscounted tS
Tait e dependent upon the stage of re negotiston
iftetore negation, no labity (Chaves Lee v. CA,
GR No. 117913, 2002,
‘Obigations of the Parts: (See above for Buye,
‘Senaisary, and isting Bark)
41 DRAWER of he ltr of eredit
+ Lisba tothe porson on whom twas issued or
the smount paid (Cade of Commerc, At. 569,
pert)
+ In case of revocation, he must inform the
bearer and the person to whom itis addressed
(Cade of Cammerce, A. 570)
12. BEARER of lator ofereit
Pay the amount received without delay (Codo
2f Commarea, At 57, par. 1)
|. ADVISINGINOTIFYING BANK ~ te bank whieh
Coneysto he solr the existence ofthe ret
‘Te notify andor transmit the documentary of
credit to the saller-beneticlary
‘+ Assumes no lilly
4, NEGOTIATING BANK the bark which leounts the
aft preset by thecal.
w duyatdiacounts & drat und
credit
‘+ iabitty depends upon the negotiation
(© Belore negotaton, it has no Wabiliy
‘with respect to the seller
‘2 Alter negotiation, theres 3 contract
felaionship.prevaling between the
regotiting and the sllor
5% CONFIRMING: BANK’ ~ tho. bark which lords
roconce tothe fotr of ere issued by & lesser
‘un ting bank
1 Assumes a direct obligation to the seller and
its liability a primary (Foot Bank and Trust Co.
CA GR. No, 94209, 1999)
the lttor of
ABASIC PRINCIPLES.
4. Doctrine of Independence
COMMERCIAL LAW
Tha Toler of ered, Wansocbon tears That & bank,
deterring compliance wih tha ors of alee of ere,
ie requred lo examine fly the shipping. documans
raserted by the soler ands precluded frm determining
lahat or not the main contacts acually accomplish
cornet
aseures the eal or he benetclay ef prmetpayrnent
Independent of ary breach of the main caret nd
precludes the issuing bank tem detaining whether De
Inain eotractis actualy accomplished or no (Transl
Phitppinesu LizonHyaro Cop, GR No. 145717, 2004)
‘Thyee Distinct and Independent Contracts in a Letter
oftredit
{2 Sale betvaen the ser and the buyer
Contact of buyer woh issuing bank, and
Tholoter of edt ise, wherein the bank promises to
‘ey pursuant wo the terms and condone of he eters
‘Of cred, Tig assures souor of prompt paymar,
Independent of any breach of he main sales contac.
In slate of perpetual separation ~ they are vested
Independent. Any discrepancy between tho amount of
‘90nd stipulated inthe eal and tha ofthe LOC wl nat
Beet tr vaity and eorsasainy he rrrloge
Contract As the Bent Is nak exzected to go bayond the
‘cuments nthe LOG, 0 ste shipper nol expeced o
ook beyond the represerations fhe sel.
‘Tne carers not even charged wi knowledge of he cargo.
“Tha being the cae the remedy ofthe buyer K would be
‘agains the seller and not agains the caer. (Kang Hus
Paper Products Ga, Ic. x. Court af Appeals. GF. No.
176868, 1098)
Independent Nature of 9 Later of Credit ay Be:
‘8. In foo where te eres independent rom the
[siieton aspect and sepsrete obigation fre
‘the undering agreement like fr instance a typical
standby: or
Only 28 fo the jisticaton aspect tke Ia commerce
Tete: of ert or repayment standby, which is dontcal
with the eblgatrs under the underying acreement
(ranatold Pippin v. Luzon Horo Comp, GR NO.
148717, 2008,
2 Fraud Exception Princip
Frauds an exception fo the independence pincpe. That
ig, the unvuhidness of a conteate accompanying =
tdernandfor payment under standby eect may quay =
frau suficlent to suppoM an injunction again paymant
Poge 4 of 250,
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ATENEO CENTRAL
BAR OPERATIONS 2019
(Tranaters Prippnes v Lanon Tyre Co, OR No
146717, 2008).
In eters of ret renssctone, feud anexcaptiontothe
Independent Principle. Frau con ako jy te seus
‘of eninunction against payment,
‘The requirements for such injunction to the
the flowing: PAL)
‘thre char Brot of aut;
1. the fraud constutes. fraudulent Abuse of the
independent purpose ofthe ler of et and rately
fraud under the man agreement ans
e reparale Injury might follow iF Inncion Is not
‘fares or the recovery f damages wou be sereuey
‘damaged (Mansfeld Pritppines v. Luzon Hyaro
(Conn, GA No. 148717, 2008.
Nature or Legal Reltons Arising From Latter of
Crest
ima be made contona. ut fox purposes of petoting
‘hebanking and merestiaconmaniy, conor st
‘ecomplod why however ners, Reutty an
‘rosch of enact on he pro the sar othe yer or
yy como ty an ben ee
ns he saler UAMARCO van Toang, GR. Ne
21911 1907
Inateter of eresitransacton, means thatthe documents
{endored by the cater or beneficiary must stil coor
to be tem ofthe ltrs of cet, |e, they must nee
documents raqured by the Iter of est. Thus, 2
corarponéent bank which depars fom what has Been
stipulated under te ltr of crea, as when t acepts
fauly tender, acts on is own sk and may not thereater
be able to recover fom te Buyer rte issuing bank. a
the ease may be, the money thus paid to the beneiiary
(Fea Bank vs, CA, GR. No. 94205, 1967)
When Letier of Credit Considered Consummated
Contract:
Ii te dle of payment the amount of the foreign
‘umerey to the credo in his country by the agent or
‘coespondent bank inthe coun of the debtor tat ums
‘tom exacutery to execute or consummated canvct. is
not the dat of peyment bythe dablr to the bark in hit
‘couriy ofthe amount of foreign excnange ste hat makes
‘te contract axscuod ox consummated, becouse a bank
‘ay gran the deter extension of time to pay ssh debt
COMMERCIAL LAW
[Bairan Compania w CB of Tre Phippiies, GR. WoT
10185, 1958.
Page 5 of 250 ATENEO CENTRAL
BAR OPERATIONS 2019
TWAREOUSEMANS ET
Worshouseman's Len, In General
[Awrarohousemars on over te goods deposed wi him
‘3 his securty for the payment of tho charges. money
‘uvanced, and. other expenses owed to the
‘warehouseman. Clearly, th len ests fr the benef of
the warehovseman
‘Seclon 27 of tbe Worchouse Recaps Law (Act No
297)! provdes the claims ncuded in the
‘rarahouseman' en
Genera ule: a warehouseman shat have alien on goods
‘Seprted or on tha proeds thereafin his hand, or
2. Al lal charges for sorage and preservation ofthe
‘goods:
b, Al lawl elsina for money edvancod, intros
Ineurenc, transportation, labor, weighing, coapeing
fn other charges and exporses in relation fo sh
soos,
©. Mi asonabie charges and expences fr note, and
advertisements of sl, and for slo of the goods
‘oer defaut had boon made ln salsying the
\warehouseran’s on. (WRC, Soc. 27)
+ Exexpton if negotiable eclg a anues fr goods,
the warshouseman shall have no fen thereon except
for charges for sloage of goods subsequent tothe
ate ofthe receipt. WL, Sec. 30)
+ Exception to the exception: 2 warshousoman shal
have aon insole a the negotable cast expressly
‘cnumerseg oer chargos for which said ten
‘aimed, In euch case hare shal bo a en fr be
‘charges eumaraled so or as ey ae withiniheterms
fof Sec, 27," even f amount of the charges £0
‘Snumerstes fot tated the rece.
* Fert papoees of te Atom, he erence Sacsons
‘otro tne Warehouse Recess Low (RL), unos cmos
Frscatee
See generate
2 See. 28 gaint what popary me tln may be ered —
Stet eprovions of secton ry a wareoxserns in
rroybe even
3) Aga l goed, honor depsiod orig othe
Pesan wha able os eat orbs cs Pee
(hi nae asec ne
1) asia a goods bslngng to bere wen nove Been
(Spanien re by epereon ska tar
formedainesnregardiowten eon seorad
Doron had beon so ented wth th pesos of
{Goode at a lego some bm a e eo re
COMMERCIAL LAW
Enforcement of Warehovseman's Lon
“The fon maybe enfered aga el goad belonging
2. The deposi, or
His prncpal (WL, Soc. 267
Lose of Warehouseman’s Lien
‘Toa lan may be lester by
‘a. Surenderng the possession threo: or
1 Refusing 10 deve he goods when a awl demanc*
pos his mada. (WL, Sec. 20)
ote:
‘Awarehouseman's lenis possessory nature. Where he
lwarencuseman curenders possession of te goots
without reais the payment offs en, the on Is st.
(PNB v. Noar’s Axe Sugar Renny, GL No. 119231,
1998)
Whore 2 valid demand bythe lawful holder of
thowarehouse receipe forthe delivery of the goods i
‘tused by the warohovseman, despite the sbsence
lewfit excuse prowdad by. be statute fsa the
‘warehouseman’s le s deemed lst. (PN v. Hon. Say,
cher Ne. 12860, 1090),
‘Aa to what the low dooms valid demand, Sec. 8
‘Ghumerates what must accompany a comand. (PNB W
‘Hon. Sayo, Se, Gi No, 129818, 1998)
‘The Following Reasons May Be lovoked By A
‘Warehouseman To Lagilly Refuse To effect Delivery
(OF The Goods Covered By The Warehouse Receipts:
epost on wh kth godin god at abe
+ see"8 Calgblon of wrehouseren to dole, — A
verdouam, ne abotce of some Sul excate provies
by [be WarerauseRecabs La, bout lo ees De gd
ton» dean rade ety the Pale of roca fo Fe
‘tote byte dopestar ave demaneis accompanies Wt
2) An frost warho.samn' en
5) Anafertesurendr Be rooape# negli wth uch
incaromentrar ws necessary oe nepaeton
‘oreo na
ce) Rreadoss on wingnass sgn, wan the goo ae
Gatvres, on eaewacyment Matthey Mov. been
Goivres, Wruch grate fequesed by Tho
age 6 of 250
ocoogoogcqggcogo oO
eooca00
ocoe
oO
oO
[ATENEO CENTRAL
[BAR OPERATIONS 2039
Tha Teer OF The Recepl Does Na Sanely The
Conditions Presobed In Secton & Of The Act. (See.
a
'b. TheWorehouteman Has Legal Tile in HimsolfOn The
goods, such tile or right being derived dec or
incited em a ranster made bythe depastor a the
lime of er subsequent fo the deposi for sloage, or
trom the warshoussman's len. (See, 16)
‘©The warehouseman has legal setup ete or ght
of third persone as lol dotnse for non-dairy of
the goods es follows:
ie Wee the wereheuternanhas been requested, by
‘ron boha of he person lwuly etl ioa righ
‘of property of or posession in the goods, nt 10
mae such doivery (Sec. 10), in which case, the
\warchowseran may. aber 96 @ defense to an
‘boon brought agains tim or non delivery f the
(eds, er a5 an orginal sul, whichever is
‘opropate, reque all known damanis. 19
1» interplead (Se. 17)
i, Where te wareheuseman had infrmation thet
the delvory about to be made was 10 one nol
lawily eniled 10. the possession of th
(goods (Sac. Dyin whieh ense, the
‘Watchovsoman shal be excused rom fli for
Fotesing to deliver tw goods, ltr tothe
‘Sepcntor or person ming under him o fo the
‘adverse claimant, unl the warehouseran has
had 2 resscnable mofo ascertain the vay of
the adore css orto beg legal proceedings to
‘compel a claim's to rpoad (Sec. 18): and
1, Ware the goads have sendy bean lowly sok
to thi persons osalisty a warehousemar's Fen,
‘or ave been lawlly sold or disposed of because
of thor porshabe oc hazardous rare (Sez 96.
1d. The warsheusoman having a len valid against the
Derton demancing the goods refuses to delver the
9068 lo him Unt elon sated (Se. 31)
(6. Tho fire was pote ony fou n he pet of he
warehousoman, 3 by shoring tha, prior to demand
for deivery and rts, the goods were sicien or
deatoyed by fre, food, sfc, wthout any negigence
‘onhis po, unless be nas centcted soos oe ble
insuch case, o tat te goods have been taken bythe
risiake of © tid person winout the knowedge or
impli assert ofthe warchouseman or some other
[bstfale grou for nondairy. (PNB v. Hon, S30,
Jr, GR. No, 129818, 1998)
‘COMMERCIAL LAW.
Warehouseman's Remodies
‘The folowing are the comedies alate to a
warshousomn havieg a valid lan against the person
errandin be goods:
18. Torefs to dalver he goods unt te ian is satseg
(See. 39
». To couse the exraluiclal sal of the goods and apoly
Ue proceeds to the vale oe en (Sees. 33 34)
tnd
© Byothermeans slowed bylaw oa eestor agsirsthis
ebro he colectin fram the depostor otal the
‘charges uhicn the depostor has bound rise to pay.
(Sec. 32); oF olherrewedias slowed by law fr the
tnfrcemont of ton aginst personal propery (Sec.
535) lor nstance, by way of count in at con
to recover the propety fom the warehousemsn, The
third remedy i sought jal by ng ci acon
for unpaid charges :
Note: Warehouse receipts ae aso known 8s quedans
mere © worehouse rosipt or quan fs transferred or
‘ondersedtoa crear only to secre the payer of alean
‘ot de, be Wansferee or endorses does nat automaticaly «
became the owner ofthe goeds covered by he warehouse ~
‘receipt or queden but he merely retains the ight to keep
‘and wih the consent of ho ouner to sell them 80 a8 to *
‘Sais theabgation fom th proaoeds of he sao, this for
{he smole reason hal he ransaton involved na sale
but erly 2 morgage oF pledge, and that F the propery
covered by the quedans or warehouse recipe 18 lost
‘without the autor nagigence ofthe merigages orpiedgee
Dr the varaletee oF endoreee ofthe warehouse fec05 oF
‘qusdan, thon s2id goods ore to be regarded as ost on
‘count af he rea owner, morgage or pledgor. (Martinez
V-PNB, GR No -40B0, 1853)
2. Rights and Obligations of the Parties
Rights of the Partioe
‘+The person paying shat have te right to demand
oot of identity ofthe person in whose favor the
Inter of cect was ‘sexed (Code of Commerce,
‘Art 5603)
+ Incase of non-payment, person to whom te eter
of credit Is aderessed may Instiute an action
Invahing exgcutian (Code of Commerce, Art
Sr).
Page 7 0! 250 ATENEO CENTRAL
Page 8 0250
COMMERCIAL LAW
oO
oO
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v
a ATENEO CENTRAL
[BAR OPERATIONS 2010
‘COMMERCIAL LAW
[COoTEUST RECEP TS LAW] Te tis cic ware oft goats andre amcantat
‘A.DEFINITION/ CONCEPT OF ATRUST RECEIPT
TRANSACTION
Trust Receipt
[A wittonprinied document signed and delivered by the
fentusee In favor of the entusiar, whereby tho lator
Felesses the goods, docimentsorinarumen over wich
he helse abealuto til or = secunty sere fo the
possession othe former, upon the enrsle's promise to
ald ald goods in rust ofthe enbustar, and to sll or
obtewise depose of the goods, et. wih he obligation to
tum ove: bbe proceeds thereat tothe exlent of what &
‘ving tothe ertuster, of retu the goods UNSOLD,
orto othe: purposes.
‘rust Receipt Transaction
‘any tansecton by and between the enuster and the
fontrsio, here the entusle, who cans. and elds
‘bsakite tle to or secur interest over con specied
(ood, documents o insfuments, releases the same to
{he possession of he entusioe upon theater's execution
and delivery 1o the endusier and the trust ena (Test
Foceiote Law, P.D. No. 116, hereinafter TRL) See 4),
Note
Currency in which
‘denominated:
(© Philippine curency
© Any toraign curency acceptable and olgble 2s
pat of Be nation! eserves ofthe Piippnes.
ES payment shall be rade in ts equvalnt in
Priipine currency, computed atthe
prevating exchange rate onthe dato ofthe
proceeds of ssle of goods, documents oF
Insruments held in nt by the entrust are
tues ve oF on such dale 2s sulted
(TRL, Sec. 6)
1+ Ina wustrecipt ransacton, tie fundamartal thatthe
pefson who advanced "tha payment. for the
Ierehandise becomes the absolula ormer of said
merchandise an continues 2 owner un he or she is
2d in ul orf the goods had already been sli the
proceeds shouldbe turned aver o fim or Ne” (Land
Bank of the Phiigines v. Pore, off, GR. No.
188886, 2012)
trust recsipt_ may be
Contents of Trust Reesint
3, ‘A escrpin of goods, documents or Isruments of
the rust receiet
the drat to be pid bythe entuston
‘& Anunderaking oa commitment ofthe ents
To noid in tet Tor the entusier the goods,
documents or natument therindesrbod
4, Todispose of hem nthe manne prowdesforin
tho tus rceit|
Tum over the proceeds ofthe slo of goods,
documents or natroments to te ens oF a
Sppear on tho ust recat oto rou the
‘0008, dociments or isuments inthe event of
thelrnon-sale within the peice specfed train
|. LoaniSecurity Feature
+ Aust receipt sroemant is merely a collateral
‘agreement, th purpose of wich iso serve as a
secarty
+ inflaton to eta of cred, the wust rocsot is @
separate document, Whe the tust receipt may
have beon executed es a secur to the ltr of
edt, sil Be two documents inate diferent
\néeiakings and obligations.
‘Obligations in the Trust Receipt
FOR Goooe OR | FOR WETRONENTS
DOCUMENTS,
7 Tose her Tiseei hen
2 To manuloehre forte 2 To deliver tom 8
purposes of sla
‘3. To unloalsip 6 deal ‘tect — the
‘ity thar in maner | consummation of 8
rlminary tote salo | wansacion —_invohing
dalvery 0 a depoatary or
avegster
Te eect ter
presentation, election of
renewal
Distinguish Betwaon Trust Receipt and Lettor of Credit
lank of Conmaree v. Serano, GR. No, 151895, 2008)
“TRUST RECEIPT | LETTER OF CREDIT
The uslee exeeues @| Nisan engagomentby he
tus recipe Binding
Fimsal 6 not the goods,
(losumens er narumats
frist for the onuster| wil honce date or hee
{and to dapose thom wih | domands of payment afer
the oitgation to tn over | tbe condone specod
the procoods to tho ena: | the credit have beet
‘tthe debtor tne unscd | complied with,
foods, documents ot
age 9 0f 250 [ATENEO CENTRAL,
BAR OPERATIONS 2019,
Tatoments Waccoarce
th he tor ofthe ust
Note: When the debtor receives goods subject ofthe rust
receipt befor the tusk receipt was enfered ino, the
transaction isa ste lnan(Colnares and Veloso CA,
GR No, 90828, 2000
Purpose of the Law
1. To encourage and promo he use of ust receipts as
‘an addons! nd convenient aid to commerce and
tree:
b. To provide for the regulation of ist recelats
ronsactions a orer to aasure the protection ofthe
‘ghts and enforcement of te obigaton ofthe partes
Involved thea, and,
2, To declre the misuse andlor misappropriation of
eds or procaaes realized frm the sale oF goods,
‘Socumens or nsturents released uncer ust eit
‘8 acriminal offense punishable as estate, (TRLSec
2
‘Trust receipt vansecton imposes two obligations on the
(to deliver the price ofthe sale OR.
{@)reten the same fo he enter
‘The Twst Recaps law a supprid by Arte 315 of the
RPC, proves tal fale to comply conetiutes ESTAFA.
In Gonzales v HSBC, Petitioner Gonzalez as Chairman
‘and and C20 of WLRC acknowledged reeiton hal ot
MLRC varus gofig equipmonts and. assorted Walt
Disney ems and signed the lwo Trust Receipt
‘Agreements Upon due dater of the Trust Recep,
respondent HSBC demanded fm NLRC the tumover of
the procoods of th sale of the assorted goods OR is
relun. MLRG flee to comply th ele option, hence
HSC fed esa for vialon ofthe TWst Recep Law
gainst Gonzalez
Evidence shows that Gonzalez exocutes an affait
scinowedging roel of Die Wst recapt on bohal of
URC. No payment orretums have been made. Further,
the crime imal proibtum, ware mare fltzo makes
hi LABLE. Though he signed the Trost Reespts
ofpralaofcer and nad ne physical possession over
them, he cannot avd responsi. The rationale fs that
they ae vested wth autor to devise means 0 ensue
compliance wih the Trust Recep Law. (Gonzales v
S86, 6. R- No, 164004, 007)
‘COMMERCIAL LAW
2 Owners
Instruments Under the Tra
Eniusterhods absolut tte the goods, document, nd
Insiuments (RL, Soc 4)
+ Accordingly, norte to sere tha the banker shall be
‘repaid at Pe lal pon - hat, wren tho Imported
(ods fal roach the ands ofthe intended vende
the banker takes he fl 0 fo tho goad ato voy
begining, he takes Has soon 98 the goods ae
‘brought and sotled for ty his paymonts or
_2cceplances in te forelgn county, and he continves
‘hal that teas his icisporsabie secu unl the
‘ood are sold an the verdes scales upon o pay
{or tham (People vs. Yu Chat Ho, G.R, No. (29278,
‘28.
FEniusiee only holds the goods, documents and
Inatumente a tuel or 9 secu in faverof ho entustr
ORL, S20. 4)
+ Toe secu le not an onary eds by the importer
to the Benker, forthe importer has never gore the
‘oade, and mareover he is notable to dover the
possession; butihesecuy isthe complete tia vesto’
Signal inthe barker, ands earcteristcs ofthe
transaction has again and again been recognized and
proteced by tne cours. Ofcourse, he le st botiom
scurly tie. 98 thas 2ometmes been cae,
the banka lays under the oblgaton to =2amvey:
but only ste his wevancoshave boen ful repaid sé
ster the pert has tulled te ether terms ofthe
oniect (Pope vs Yu Cha Ho, GR. No. 129278,
1920).
Page 10 of 250
eccoceaocoocoeescooccoo0oa900055N o° ATENEO CENTRAL,
‘5 Riahis and Obiaations ofPanies
4. RIGHTS OF TH
Entrusterv.Entustee
TENTRUSTER ENTRUSTEE
7 Enid ohe rosaeds| 7 To recave supe
‘rom the se of goods, | tom he pubte sale
documents ensues
2 Enid whe un oh
‘te goods, et incase of
‘non sle
To have possesion
ofthe goods as 2
‘condition ferns abity
Under TRL. (ames V.
(A, Oo. 30022.
25,186.
3 To enlore al ohare
sonfered to fim under TRL,
“To cancel he tu fle
Instuments or f proceeds
reatzed thereto upon the
default ofthe enue.
3. To sel the goods ina
ble o pvt sale upon
‘notes the enrstee
case of det
8 Nay prchaee tthe
Intended pub sale (TRL
Sec.7)
7 Enero acy
‘As aganstinnocent
purchaser for valve: not
protered (TRL, Sec. 11)
As aginst editors of
‘he enrustee: profared
(TRL, Sec. 12)
4. Validity of tho Security Interest as Against the
Creditors OF The Entrustectinnecent Purchasers
Forvaive
COMMERCIAL LAW
“hy purchose goods Tom an envusioe vA GHD wa,
‘or of ooumants or insruments trough thet customary
{ecm of tanster, who buys the goods, documents, oF
insrumentsfor value and in good fs rom he tse,
aoqures cad goods, documents oF istumenis fee fern
Ihe enrustrs seuey mierest, (TRL, See. 17),
Note:
{General Rule: The Iw warrants the valisy of pottons's
secu Itreat nthe goods pursuant he writen forms
ofthe tet recspt 3 against al cedars of te Wut
recebpl agreement.
Exception: When the properties ae in ho hands of an
Jnnocert purchase fo Value and in good fath (Prudent
Bank v. NUR, GAR. Na. 112592, 1995). The enusor
wins aginst any ofthe errusoescrediorsexoep anes
“innocent purchaser or valve and in goed ah
2, OBLIGATIONS AND LIABILITIES OF THE
ENTRUSTEE
4. PaymentDolvery of the Proceeds of Sale or
Disposition of Goods, Documents, o Instruments
‘Tha entruster shall be ante tothe procseds fom tbe
al of he goots, documents o nsrurents released to
the eniustae tothe extent of tha emount cing tothe
‘eninster ors appears ne st ecnp. (TR, Soe 7)
2, Return Of Goods, Documents, Or Instruments in
(Case OF Non-Sale (TRL, Sec. 7)
‘The entustor shal be end othe return ofthe goods
documents or inseumants incase of nor sale
Entrust. Entrusten
TENTRUSTER ENTRUSTEE
“To gwe possession of 7. To aid me goods othe
the goods to the | proceeds ofthe seein test
entusee fortis entuster
Z.Togweallec6caye [2 To comply wit We
nate tothe entustoe of | allrniveebigation
the inenton to sel the
‘gocds at the ntanded
publ sale
3 To ensure agama! as
Insturents pursuant the wile lem of ust ei the goods for thelr tla)
shal bo vad os against al crditrs ofthe entrust for value
the duration of he rust recap agreement. (TRL, Sec. 12)
‘As Against Innocent Purchasers for Value
age 11 0280 [ATENEO CENTRAL
{GAR OPERATIONS 20:9
To woop Te poor oF
sale proceeds separste
and sentiabe
To relun te goods
the event of noneale oF
pon demand ofthe
sensor
3, To abiave he
conditions “of Ihe tus
receipt not contary vo the
Srouiions of the TRL
EEniruste's option to cancel the Trust Receipt
+ The enbuster may cancel the tust and take
possession ofthe goods, documents a insruments ot
‘ofthe proceeds realized therefrom at any time upon
‘eta o fale of he orzo to comply wih any ot
‘he terms and candtons ofthe tus recip.
9 The enbusier In. possession of the goods,
documents or ncrumenis may sll te gots at
‘pubic of private slo, provided holche gave
{ue noice othe entrust sess days betore
such ae,
0 The enmustr may, ata publ sale, become 2
purchaser.
+ Te procoods, n caso of any public or private sale,
habe elle inthe flowing manner
‘2 Tote payment ofthe expenses tereot
2. To the payment of the expenses of retaking,
keeping and slong the goods, documerss of
inerumenta
& To. the satstecion of the
Indebtedness to the entste.
entrsto’s
Not:
‘The sorustes shal eceve any euiplus but shall bo
{ate to the ertucar for any detciony.
“+ Notes of see shall be deemed suey given itn
‘ring, ad ether personaly served onthe atrustee
‘rsent by postpaid ordinary allo he entustee's
{aot known business aaerose,
4. Lisbllty for Loss of Goods, Documents or
Instruments
1+ The isk ofloss shall be bome bythe enrstee,
+ Loss of goods, cocuments or nstumenis, pending
ther elsposion, shal nt extinguish he obligation of
the enusten to the entste forthe value thro,
\whathar or not th ead Joss was due to the fault oc
rogigence othe ertusian
‘COMMERCIAL LAW
Tabity ofthe Entruslor iv Any Sale or Convaat Wade
by the Entrustoo
‘The enters nat responsible as pincipal or as vendor
Under naa or correla sl mace bythe entusi by
ive of such isarest o raving gen tie eriusiee the
oor lo set or onerusecspose of tne goods, documents
fr insbumants under the terms of the bust receipt
‘earsacton.
Note: The repossession of the goods under De tus
cel does nol sues to sally the principal loan
‘blige, The entrust remain Eble fr the dfilency
‘fer te proceeds ofthe sale have boon apped tothe
Dayan of expenses ans debt (Lene & Company, et. af
WIMBTC, GR No. 158622, 004)
Falture ofthe Entrusae to Tur Over the Procaede of
the Salo.
Isha constta the cime of extafe and may iso be ©
‘cute for damages under Ar. 33 of te Ci Code
(Prana Bank v.1AG, GR, No. 74888, 1982.
Novation f the Trust Agreement
‘A anorandutn of Agresment snare ilo between the
bancenituster and erustee exingushed the obigaton
Under te exiting at receipt betause the ogroment id
not only reschedule the dobis ofthe enusoe but it
Provided principal canditons which ae incapable with
the tust agreement Hance, he Baby for breach ofthe
Mererandom et Agreement woud be purely cn nature
‘nd no ermialfabillyundor the TRL can be imposed
(@hippines Bork v. Aledo T. Ong, GR. No, 123176,
2002}
"Note:The criminal abit arising rom te losnagreerent
seoures by 2 wus resp isnot extinguished absent the
‘reorpatbilty of ie ablgation under to fst ax second
prooments (PNG ¥. Lian Sorane, GR. No. 164061,
2012)
4, Penal Sanction if Offender Is a Corporation
'¥ the vilabon or offense = commited by eorpecatin,
pariersip, association or other jude! ates, the
penally shal be imposed upon the decor, officers,
[Emlojees cr ater ofa or persons theren responsible
for the offense, wihout projccs to te cil Tbibes
‘ting from the cial ease (TRL, Soe 3)
Note: (BERNABE) As for cv lable, crectors, offeors
‘and employees acting as corprate agents wil ot be
‘rely table for tne debs cured. Lisby shall fa upon
‘he hends ofthe corporation UNLESS they spusta or
Page 120250
ceoocoecocoecoooooqgo0og00g 50
cace
¢ ATENEO CENTRAL
BAR OPERATIONS 2019
Fe 1 be personaly Tae Tor The Sous (aeTonso
Crsoioo v People of the Philpines and Chins Barking
CCaperation, CMe. 199481, 2012)
(S-REMEDIES AVAILABLE
criminal
The aur of an entrusto te tum ovr the proceeds ofthe
sate ofthe goods, documents or nstumentscoveres by 8
trot receipt to the exlent of the mount owing of the
fntuster ora appears nin rust ace orto return sald
‘goods, documents or nsrumente hey wore na sls ot
eposed of In accordance wih te terms of the tust
receipt shal enaliute te etme of exe (TRL, See. 13)
In order to be val prosecuted for estata in rlation to
See. 13, thoy
‘Have the ebigation to sell and rent the proceeds
‘hereof te entero retin the goods nt sls,
b. Misappropted the goods andor the proceeds of he
sae
Performed such ate wih abuse of conidence tothe
prejudice ofthe enitster, a,
14, Demand war made on tie entustee (Metropolitan
Bank and Tus! Compeny v- Jinmy Go and Benjomin
(Go, CRN. 15547, 2007),
Note:
Evan ifthe accused oi not recsive the merchandise for
‘pes, he fs nevertholess, covered by article 3150)
because aftr recaiving th pice ofthe sala, ne ed not
‘alver the money fo the bank of, ihe 3 nol sel Oe
merchandise, ne dt ream kta th bank. (Poop
Cuan, GR No. 27807, 198),
‘ymen both paras enter ino an agreement knowing fly
wo that to ret ofthe goods subject of he rust ecg
{Snot posse, even without ary fault on te pat of te
trust, itisrola bust cept ransacion penalized under
‘Sec. 13 of PD 1151 elation to At 315, pa. 1() ofthe
FRG (Hur Tin Yargv. People ofthe Pilpoines,G.R. No.
195417, 2013.
cw
‘Alor commencing ciminl action fr vilaton of he Teast
RRecabpte Lav, the entusler may evfors avi Hablty
aising out of the tust receipt ina separate cid
‘Scton. Under Ail 35 of he Cli Coda, ac action for
damages, ently separate and distinct rom the cial
‘ton, may be brought by the ljred party in eases of
efamation, fraud and physical ines. Esleto fs
‘COMMERCIAL LAW
‘Under Faud (Pradarial Bank v_TAG GR No. 7aBB6,
‘December 8, 1852; See also Sarmiento and Limpin v. CA,
GR. Ne, 122502 2002,
dof tele
age 13.0250 ATENEO CENTRAL
[BAR OPERATIONS 2018
T, NEGOTIABLE INSTRUMENTS LAW.
‘ToPIC OUTLINE UNDER THE SYLLABUS
UL NEGOTIABLE INSTRUMENTS LAW
Requisite ofnogotibity
Forgery and materi ateration
Rights of the holder
{lderin due course
pope
FORMS AND INTERPRETATION
Negotiable Instrument
Iisa wrllon contact forthe payment of money: by ts
fey, landed a8 a aubettite for money and lone
‘pass fram hand o hand, to gve the holder in due cose
‘he fight to hold he same fe rom defenses avaible 1
‘rr pares and colt he sum 38.
‘A, Requsies of Negotabilty
‘a natument tae nogatisle, muet conform te the
falowing reauierrents: (SUDOC)
must be In wring and Signed by te maker or
eeanet,
Must canian an Unconditional promise or order to pay
2 sum cenainin money
Must be payable on Demand, or st 3 fed or
(eteinat utr ne:
Must be payable o Orr orto bearer, nd
Where the insrument is addressed toa drewos, b=
rust be named or otvervise indicated Dern wit
Featonable Corsi. (apotable Inrumants Caw
(ONIL}, Sec. 1)
Note:
Tender of payment cannot be presumed based on the
reumstances it must be proven by cede evidence.
‘There must be a posive and uncondttoral act of ofing
{he aga curency ss poyment forthe deb, demanding ts
acceptance Justbocause oneis capable paying cost
‘oan tate, nae, actualy pale
Even assuming the check was indeed fered, checks ~
lahether onary er mangers checks ~ are nat logal
Tender. They aro ony subsiuis for money and mere
avery here! Goes not operate as payrent unt ney re
COMMERCIAL LAW
‘athe. (Roman Cathate Bop of Males vs. TAC, 15H
‘SORA 417)
Poridoted checks doesnot operate as payment unl fer
tte. same. has boon cashed. (BP) Express Card
(Corporation ve. CA, 298 SORA 260)
‘nse nar-nagatabe intent may nol be negolted,
it may be aeskgned of Vansfered inthe absence of an
fegrose prion in tho face ofthe Instrument. The
promissory note, wile mare "ner-negeabis" was not
‘Stamped se "noniranferrale™ or "pomassigna
‘Assuring Dist Bere was such a promi, it sl cannot
bbe invoked again on asaknoe or vansforee of the
promissory sola in good ath & wlo noice of such
Drobo The sights ofan assignee arenot any greatar
‘an height te assign, sicathe assignees meraly
‘scbstted in the pace of the sesgnor and that the
‘assignee acqutes Mis nights subject othe equites~ Le.
the defenses ~ wie the bier coulé have sot up against
‘he ofgalassgnor before notice of he asin was
‘ventothe dete. (Sesbronev CA, GR 89252, 1980)
sum
“The sum payabo Ise sum corn within te mearing of
this Ac although et be pat (SDC)
‘5. Withinarost or
2, By state nsatmens; or
1 By slated inetallmars, wth 9 provision that, upon
india pxymenf ey rtstien.rot hie,
{he whole sha becom
44. Yh cots of eobecon or an aornay's fn
‘ase payment shall not be made al mail. (ML,
See.2)
Unconditional OrlerPromise to Pay
Effect of Conditional Promise or Order
[A promise or order shoud not depend on 3 contingent
leven itis conden) is nor-nepotite
‘There sno “promis” if here is a mere acknowledgment
of doth. However, an acknowledgment may become @
promise bythe adeton of words by which & premise of
payment is raturaly let, such aa "payable" “payable
‘on 2 gwen 6ay", “payable on demand” and “paid when
‘ald lor (lene2v. Buca), .R- Mo. £10221, 7958)
‘When Promise Is Unconditional
‘An unused order of promise to pay Is unceniorat
‘vthinthe meaning ofthe NIL tough expe wth —
age 14 0f 250,
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‘fin Tadeaion of parte fund out of which
reimbursement is 10 be made, or 3 partuar
‘ecovnl tobe died uth the amount or
b, Asotemant ofthe Fansaction which gives rs
‘But an order or promis to payout ofa parca urd is
rot ncontiena (NL, See 3}
‘Note: The wessury warrant isnot a nogodable instrument
‘Tins face, he words “payable om the appropriation for
{od adminstaton” appear tis an order fr payment out
‘ofa pariclar fun tus the payments not unconiona,
Sibi ls one of te essential laments of 2 nepotable
Insrument (Abubskor vs. Autor General 81 Phi 959)
DemandiFixed Determinable Future Time
[An inarumont i payable ata deleinabl flue tive,
‘witinthe meaning af tis Act, wich ls exprassed tobe
payabie—
‘9. At@ cad period ater dato or sight
1. Oncor before a fxd or determinable fare be
spect therein; or
© On or ata fixed pet’ ater he occurence of 3
spect event, which is cartain to happen, though
{he time of happening be unearain,
‘An lneament peyable upon 2 contingency Ie rat
‘egtible, and the happening ofthe Event doesnot cure
Ihe detect. (ML, S204)
‘Order! Bearer, Payable To: Instruments Payable to
Order
‘The Instumart is poystle to oréor where itis drawn
payable tothe oe of 8 specie’ person orto him ois
‘rte. It may be crewn payable to reorder of:
‘payee who Is not maker, drawer, er awe:
The crower or maker: oF
“The erewae;or
“wo or more payees jit: oF
(One or some of several payees or
The halder ofan ofles forte ine boing, (ML,
ee 8)
‘Note:The proissary note contained the words ‘promise
{to gay tothe Insusal Producte Marking the sum of."
inet contin weres of negetabily"Itwas not payable
to order (oF to bearer) and was thus non-negotiable.
‘Tho consent ofthe payer thatthe note be payable to
‘order is indispensable, The words “or order or "tothe
fofder of" must be presont. In this case, the note was
payable lo Indusitel ony. Thus, any subsequent
‘COMMERCIAL LAW
Purchase o saugres WaT era aps Tio He whos
{trust and ic open le all defences aval against
the late. The nal being nan-egotable, tony flows
(Rot IFC Laasing was not a holder in due course
Furtar, FO Leasing knew wall encugh thet the right of
Industral was not urconditonal- the some beng Subject
to waranty es nt olin good sth ad knew te
ina of lt’ le here.
DO: if he Instumant is negotisble, the indore or
Uranseree can actualy soqure a better right than the
Indorser Provided he is a alder in ve couse, he is
Immune tom whatever defenses thre ao a between the
‘final pares ~ such a= breach of waranty in thi caso.
(Concolsied Pywood ve IFC Lesing, Gr 72593, 1987)
‘atthe onset itis obvious that the check issued by Nell
‘was equivocal and very ambiguous. The payee was
hot ndiested therein to any reasonable certainty. And
{3 2 rule the ambiguity is construed against the party
‘who caused If in this case, Nell I couldnt be
ascertained whether the payee wes Equitable or Casi
Tho Bank ler conshued as payabo tothe account of
CCasule Entaryises and thus lowed the same 10 bo
oposite. (Equitable Banking vs, AC, 161 SCRA 518)
Instruments Payable to Bearer
‘Tha instrament is payable to bearer.
‘2. When tis expresso to be so payable; or
i. Whan iis payable to 2 porcon named harsin or
bearer of
‘& When it is payable to the order of 2 fetus oF
romexising person, nd such ac was known to
‘he person making so pay;
«4 When the name of te payee doesnot purport to
be te name of ary perso: oF
@ When the. only or last indorsament isan
‘ndorsementi lane (Mil, See. 9
Note: A chack dawn payable tothe order of “cash is 2
‘heck payable to bearer the Bane may gaye person
presenting it for payment oven wlo the drawers
Indoreement. The word “cas dose not purport tobe the
name of any person ~ thus te inseument i payable 10
bearer. though there are some tines when the Barks
‘would reqire ingorsoment, this afogether i nol 3
Tequemant The Bank woud not be negligent fot
holding the bearer tobe Keniled, (Ang Tok Lian ve. CA
87 Pn 98),
Page 15 0250 ATENEO CENTRAL
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able to Bearer
Payabla to Bearer
Payee must be named o| Payee need not Be
Indsied with reasonable | inceaied: is encugh Hat
ontaniy Mi, See 8) | is expressed to bo
payable to bearer (ML,
Seba)
Nagoiated By | Negeiated — By are
‘ndorsement coupled by | delvery (Ml, Sec. 20)
every (iL, Seo 30)
Tnetunent — oignaly | hatonest ofl
Dayatie t order can be | payable to beorer cannot
‘Sonverted into a Bearer | be converted Ino 2 oer
‘retort twough tank | nsrument. A bearer
‘ersement (ML, Sec | instument always remains
Ste fusn ard can bs
patted by mere
‘alvery even specially
indorsed (MIL, See 40)
certainty
‘Whar te insrument is payable to odes th payee must
be nomad or tress indested therein wih resonable
conan. (ML, See He)
How Negotiabilty Is Determined
‘by the prowalon of tho Hogotatle Inert Lat,
parsulmly Sects | tere,
By eonldaing tho who's intumont,
By what appears onthe face a th instrument and not
slbcuhore. (Calor v.CA, Gi. No. 97753, 1992)
In dctrnining whether the instruments negtabe, only
the instrument eal and no ether, must bo exartined ane
‘compared with be requvements sated in ec.
IF appears on the Insvument that tacks one ofthe
‘equroents, tis not negobable and te provisions ofthe
Nit do not gover the instrument. Th requirement locking
‘anno supptes by using separate nstumentin which
‘hat vequeement appears.
Note: Te language of negoiabily which characters 3
rnogotatie paper as cet instumact ss freedom to
‘route as 9 substitute for money. Hence, Heecom of
regotsbyis the ouchsina reli to the prtecion of
hoes in due cours, and the reedom of nego
the foundation forthe protection which the la throws
round a holder inde couse,
‘This freedom in negotibllty is totally absent in 2
cerca of indebtedness as itmarely to pay asum of
COMMERCIAL LAW
Taney To 6 speafed parson oF entity Tors porod
time, (iadors Royal Bankv. CA, GR. No. 93597, 1997)
‘men he documents provide het ne amounts depose
shall be repayable to the epost, such instrument is
‘ogotable because I is payable to the “bear” (Caltex
Philppines vA, GR. No. 97783, 1902)
‘ings of Nogotisble Instruments
Promissory Note
‘An oneonctcnal oriaein uring made by one person to
‘osha, signed bythe maker, engaging pay ondorand,
‘rata fixed or determinable future Une, » sum can in
‘ney to order oro bearer. Where the notes crown to
to makers own oda, kis nt complete unt indorsoc by
him. (Ml, Sec. 164)
Bill of Exchange
‘An uncretonal orden wing addressed by one person
to another, signed by the person ging i rquleng tho
peraon o whom tis addressed to pay on demand or ata
fred or determinabe uur time 2 sum certain in money
Ie order or tobeare. (ML, See, 125)
[Ris bit of exchange craun on & bark and payable on
mand. (ML, Sec 135)
Ccharacteristis of Negtlable Instruments
fa. Nagotabiiy
Allows the Vans: trom one parson to anther
‘fons t consul the Wanafres 8 a holder
Ie due course tet Is oe fom personal
dotenees.
b. Accumulation of secondary corvacts
+ stuart negotaled fom parson 10
oreo resuling o secondary laity, raking
Fore and mere persons fae tothe hater
Negotiable v. Nor-Nagotisbe Instrument
Negotble Ton egoTaa
Conti a oases a] Does rat hove al
Seaton regu tom Secon +
Governed BYE Tit does not opel exc
by ana
Tensions By Wansieres Say
negation or assignment | ssiganent
TTarseres ean be | Treo can ravrboa
oer us curse | hlderin due course
Page 18 of 250,
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Tensions who ee
halrin ue core isnot
subjectto at defenses
Transtace ms sea To aT